The Impact of Increased Probate Fees on Families and Executors
In recent times, the Victorian government has made significant changes to probate fees, which has generated much debate and concern. The probate fees, which used to range from $68.80 to $2,318.90, have now skyrocketed to $514.40 - $16,803.60. This change represents the lowest fee increase from $68.80 to $514.40, a staggering 650% hike. Critics have described this as a "tax by stealth," suggesting that probate application fees did not need to rise so dramatically. While not equivalent to past death duties, this substantial increase still poses additional financial stress on grieving families.
Government's Perspective on Probate Fees
From the government's point of view, the maximum fee is merely 0.24% of an estate's value. They assert that large estates worth $3 million or more constitute less than 6% of all applications but consume most of the court's time due to various disputes over will validity, unclear property rights, or perceived inequities among beneficiaries. The government believes that the system is now "fairer" by abolishing probate fees for small estates and setting fees for medium-sized estates lower than those in New South Wales and South Australia. For example:
Estates valued between $1 million to $2 million: Victorian fee $2,400.50 vs New South Wales fee $2,494.00 (a difference of $93.50 on the lower side for Victoria).
Estates valued between $2 million to $3 million: Victorian fee $4,801.00 vs New South Wales fee $4,158.00 (a difference of $643 more for Victoria).
South Australia imposes a maximum fee of $3,826 for all estates worth $1 million or more.
However, opposition voices argue that current probate fees already recover about 300% more than it costs to run the probate court, suggesting that the fee increases are excessive.
Public Response and Concerns
A public consultation revealed that 94% of respondents disagreed with the proposed fee increase, expressing concerns that it could:
Increase the risk of elder abuse,
Limit Victorians' access to the justice system,
Unfairly affect female legal practitioners, especially since the law around wills and estates is predominantly practised by women.
Additionally, probate fees are generally tied to the Consumer Price Index (CPI) and are expected to increase annually, making this just a starting point for higher charges in the future.
Challenges for Executors and Small Firm Owners
One significant issue for executors is the management of funds while dealing with frozen accounts. Executors will likely need to put their own funds into trust for payment before lodging a probate application. Small firm owners may find it challenging to carry a $16,000 disbursement for a deceased estate for any length of time, if at all.
Banks currently allow for funerals to be paid from frozen accounts if the cost is lower. There is speculation about whether they will extend the same courtesy to probate fees. Some suggest a solution similar to funeral bonds or insurance could be developed for high upfront probate fees.
Estate Planning: Special Considerations for Farmers
Estate planning is particularly crucial for farmers, as it is not difficult for farm land to have a value of $7 million or more. Farmers are advised to conduct thorough estate planning and consider having their land owned by trusts to mitigate the impact of high probate fees.
Conclusion
The increase in probate fees has raised various concerns and challenges for families, executors, and legal practitioners. While the government provides a rationale for the fee adjustments, the public's disagreement and the potential legal and financial hurdles highlight the need for further discussion and possible alternatives to ease the burden on those affected.